Kaiser Family Foundation Suggests Pathways for Lower Drug Costs

High drug prices may keep many people from accessing and affording the medications they need to stay well. In a new issue brief, the Kaiser Family Foundation explores two ways the Biden administration can use existing executive authority to implement policy changes related to prescription drug costs.

The first option would use the authority provided under the Affordable Care Act (ACA) which created the Center of Medicare and Medicaid Innovation (CMMI). CMMI can design and test new payment models to address concerns about rising cost, quality, and inefficiency. 

The second option would be to use Section 402 demonstration authority— a narrower and older flexibility—that allows for demonstrations to test new ways of delivering and paying for health care. 

The brief highlights recent efforts by previous administrations that explored both types of executive action, including the “Most Favored Nation Model” under CMMI authority and the proposed $200 voucher, which would have relied on Section 402. Importantly, the latter proposal drew significant criticism and some doubt as to whether it would have withstood judicial review under the Administrative Procedures Act (APA). 

The brief also outlines the process by which proposals under each type of authority would move forward, including typical timelines, and administrative and legislative limits on the types of proposals that could be pursued using each pathway. The report concludes by suggesting that several of President Biden’s campaign priorities, including allowing Medicare to negotiate drug prices directly and capping drug price increases, could be pursued under this authority.

At Medicare Rights, we urge policymakers to find ways to increase the affordability of prescription drugs for people with Medicare, including drug price negotiation. We must ensure that older adults and people with disabilities have access to their needed medications, and the Medicare program cannot sustain such high costs indefinitely.

Read the full report.